What is direct competition? Definition
Head-to-head competition occurs when two or more companies offer essentially the same product or service at the same location or which is available at the same location. Firms compete for the same market.
Direct competition is contrasted with indirect competition. The latter occurs when two or more companies offer 2 different products or services but which can be substituted in them.
Examples of direct competition
Direct competition is common in everyday life .
Take the example of smartphones. The companies on the market offer almost all the same products, namely a smartphone. Apple’s iPhone, Samsung’s Galaxy or Xiaomi’s Mi are all in direct competition. These are all smartphones with more or less the same features and are among the most expensive phones.
Brands try to differentiate themselves from other brands by being very active in marketing and offering products that are a bit different from other brands. We see it with Apple in the field of smartphones, the brand pushes the differentiation to the maximum to justify the price of their phones and stand out from the crowd.
What is the purpose of competition?
When the market is competitive, companies have more incentive to lower prices, improve the quality of products and services, and provide more choice to customers. In other words, companies must innovate to make their products different and better than others.
In summary, consumers end up with better products that cost the same or even less than those that were there before.